Abstract
The prediction of output response to price changes in the agricultural sector of developing countries is often an extremely important aspect of policy formation since variations in the price of major crops will frequently affect both producers and consumers. This paper attempts to identify the appropriate theoretical underpinning to the various estimating equations that have been used. Four different models are presented: the labor-leisure model, which is reworked as the Z goods model; the land expansion model; the nonagricultural employment model; and the two crop model. A major conclusion of the paper is that predictions of output response should focus on the elasticity of the nonagricultural demand curve for labor and various parameters of agricultural technology rather than solely on the issue of the relative magnitudes of income and substitution effects.
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